Developing nonpofit management trust

How Does a Nonprofit Board Know When a CEO Is “ Just Minding The Store?”

How Does a Nonprofit Board Know When a CEO Is “ Just Minding The Store?”

By: Eugene Fram

David Director (DD) has been the chief executive of a nonprofit for about 15 years. Currently, the organization has a budget of $1.5 million, mainly from governmental contracts and a sprinkling of donations. The nonprofit employs about 20 people full and part-time, and annually serves about 500 people in dire need.

Following is an abstract of the board’s evaluation of DD as the CEO.

• High Job Satisfaction: * DD enjoys his work and his position as a chief executive. Staff turnover is very low, and last year, DD led a board-staff committee to configure the new sign in front of the building. An engaging personality, he is liked by both board and staff. He has good press relationships and frequently uses press releases to call attention to client success stories.

• A Healthy Organization: During DD’s tenure, revenue growth has averaged about 2% annually. Client growth has been in the same proportion. Organizational finances are is good shape with a balanced budget plus a modest yearly surplus. He has a dashboard to monitor finances.

• A Fully Engaged Board: Board members enjoy working on committees such as the new sign campaign (see above), the annual dinner-dance and selecting endowment investments. The audit committee only meets once a year after the completion of the financial audit and its accompanying management letter has been received.

• Positive Community Impact: DD keeps records of clients who exit the programs each year, but has been unable to track their long-term impact on the community.

The big question is whether or not DD is just minding the store? I argue that he is.
This hypothetical organization is typical of the types of nonprofits I have encountered over a long time period. The basic fault is that the board is composed of well meaning people attracted to the mission as well as the personality of the chief executive. As a result, the operations of the organization are kept at a steady state with the active support of the board. Their rationale for this support is the need to focus on the mission. There also might be a mistaken view that the board must protect staff positions.

Some directors come to the conclusion that there is little one can do to drive change, but stay on to enjoy the networking relationships that can develop. Others who join the board resign quickly, citing work pressures. Still others decline board invitations.

A number of other hints are contained in the case:
• Low staff turnover and DD’s interest in the sign committee. The committee can spend hours talking about its color and lettering!
• Revenue and client growth percentages are very low, probably supported by certainty, to date, that government dollars will continue to be available.
• The committees cited don’t contribute much to clients.
* Many directors who don’t have financial responsibilities seem to get some satisfactions out of making decisions about moving endowment assets around. A robust audit committee meets more than once a year.
• There is no strategic planning indicated. Nonprofits, like these, also can confuse a SWAT analysis with a strategic plan. Where financial or behavioral objectives are established, measurement outcome data are not included to more rigorously assess outcomes and impacts.
• DD evidently does have the ability to become an effective development person but prefers to spend his time on smaller operational items, such as the new sign committee.
• DD does not provide any strategic insights or vision on trends in his service field.

Summary
In my opinion, there are thousands of nonprofits like the one described. Making changes in their governance or operations is difficult; culturally changes can only take place after a long tenured CEO leaves. Since they never measure up to what they could be, are those organizations with “store minding” leadership limiting the financial and human (board and management) resources needed to serve more clients in dire need?

*Categories described by Molly Polidoroff, Executive Director, Center for Excellence in Nonprofits, Redwood City, CA.

Beyond the Bylaws: A Clarification of Nonprofit Board Responsibilities

Beyond the Bylaws: A Clarification of Nonprofit Board Responsibilities

By: Eugene Fram

A nonprofit director’s duties may be much more difficult than those of a for-profit board member. Both types of directors have the same basic duties: fiduciary responsibilities; establishing, with staff input, mission vision and values; setting policies/strategies; over-viewing outcomes/impacts and conducting annual meetings. (more…)

How Seriously Does Your Nonprofit Board Take the Matter of Ethics?

How Seriously Does Your Nonprofit Board Take the Matter of Ethics?

By Eugene Fram

Most board members are aware of their obligation to ensure their nonprofit’s compliance with certain standard regulations e.g. making tax payments, submitting IRS Form 990s and/or avoiding potential fraud. But what I have found missing in the nonprofit environment is a sense of director responsibility to provide for and sustain a viable ethics program. (more…)

What Defines the Culture of Your Nonprofit Board?

What Defines the Culture of Your Nonprofit Board?

By: Eugene Fram

The General Motors debacle is fresh in everyone’s minds. A deficit in the company culture was recognized as being responsible for the disaster that resulted in the deaths of 13 people. (more…)

Can A Nonprofit Organization Have A President/CEO & An Executive Director?

Can A Nonprofit Organization Have A President/CEO & An Executive Director?

By: Eugene H. Fram

Yes, if the organization has the following structure:

Board With A Volunteer Chairperson
President/CEO With Full Authority for Operations
Executive Director for Division A
Executive Director for Division B

However this structure can be confusing to persons in the nonprofit arena. (more…)

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

Once Again! Nonprofit CEO: Board Peer – Not A Powerhouse

By: Eugene Fram

Some nonprofit CEOs make a fetish out of describing their boards and/or board chairs as their “bosses.” Others, for example, can see the description, as a parent-child relationship by funders. The parent, the board, may be strong, but can the child, the CEO, implement a grant or donation? Some CEOs openly like to perpetuate this type of relationship because when bad decisions come to roost, they can use the old refrain: the board made me do it.

My preference is that the board-CEO relationship be a partnership among peers focusing on achieving desired outcomes and impacts for the nonprofit. (I, with others, would make and have made CEOs, who deserve the position, voting members of their boards!)

There are many precedents for a nonprofit CEO to become a peer board member, some without voting rights, some with full voting rights. One nonprofit group is university presidents, where shared governance with faculty bodies can be the norm. For example, when General Eisenhower became president of Columbia, he referred to the faculty in an initial presentation as “Columbia employees.” Later a senior faculty member informed him “With all due respect, the faculty is the university.”

Another nonprofit group is hospitals where the CEO may also be or has been the chief medical officer. The level of medical expertise needed to lead requires that a peer relationship be developed. Also if the hospital CEO is a management person, he and the chief medical officer must have a peer relationship, which extends to the board.

Hallmarks of a Peer Relationship
• The CEO values the board trust assigned him/her, and carefully guards against the board receiving surprise announcements.
• The board avoids any attempts to micromanage, a natural tendency for many nonprofit boards.
• When a board member works on a specific operating project, it is clearly understood that he is accountable to the CEO for results.
• The CEO has board authority to borrow money for short term emergency needs
• The CEO understands need for executive sessions without his/her presence.
• The CEO understands the need for robust assessment processes to allow the board to meet its overview duties.
• Both board and CEO are alert to potential conflicts of interest which may occurs.
• Both value civil discussion when disagreements occur.
• The board realizes that nobody does his/her job perfectly, and it does not react to occasional CEO modest misjudgments.

Summary
Elevating a nonprofit CEO to a status of board peer does not automatically make the CEO a powerhouse. The board legally can terminate the CEO at will. However, in my opinion, the following benefits can accrue to the organization.

The peer relationship help will:

• Help the organization to build a desirable public brand.
• Allow a capable person to interface with the media.
• Define a role for the CEO to lead in fundraising.
• Allow the organization to hire better qualified personnel.
• Allow the organization to present a strong management environment to funders. After all, top people readily communicate with people in similar positions.

Once Again! Are Three Standing Nonprofit Board Committees Enough?

Once Again! Are Three Standing Nonprofit Board Committees Enough?

By: Eugene Fram

Nonprofit boards are often known for the proliferation of board standing committees. Current thinking is to reduce the number substantially. Following is one model, with only three standing committees which has been used by thousands of nonprofit organizations for over 20 years. Ad hoc committees or task forces, are used when needed for investigation of policy decisions and major strategic issues such as changes in pension plans.

  1. Executive Committee – It consists of the CEO, corporate officers and an at-large member elected by the board. The committee acts for the board between meetings, subject to later board ratification; sets the meeting agendas, reviews reports for board discussion; and appoints all standing committees and ad hoc committees.

    2. (more…)

Is Your Nonprofit Board Chair Productive?

Is Your Nonprofit Board Chair Productive?

By: Eugene Fram

Hundreds of articles have probably been published about the skills and abilities nonprofit CEOs need to have to meet the challenges of the nonprofit environment. These include: reduced funding, increased use of technology and increased responsibilities for fundraising.

Relatedly, nonprofit board chairs have been encountering escalating challenges to recruit able board personnel. Current chairs must develop a more active partnership with the CEO in fundraising and lead the board in making difficult financial, technology and other strategy decisions.

To address these challenges, following are the attributes that I think a nonprofit board chair should have to be productive, within the confines of being a volunteer (part-time) chairperson.

• Great Communication Skills: Current issues can be so pressing that chairs will need to be the types of people who don’t limit their board communications to regular meetings. Those who head the board must be in positions to return phone calls or other communications promptly and proactively seek the counsel of directors as needs arise. As a communicator, the chair should listen intently as well as provide outward-bound communications.
• Understands Importance of External Stakeholders: Traditionally chairs have not have much contact with external stakeholders. This is rapidly changing as funders want more assurance about board overview involvement in the grants they award; those providing gifts want more assurance that the intent of donor is being clearly recognized. The chair understands that an organization’s modern stakeholders range broadly from vendors to staff/management to donors. She/h understands that the nonprofit board represents the interests of a community, profession or trade association.
• Manages Board as an Organization: The chair makes certain that all directors understand their roles to overview, to have robust compliant financial and legal processes and to generate civil meeting discussions. He/s is able to abort any board attempts at micromanaging the executive group or staff. Board decisions should be viewed as being democratically developed, even when there is not unanimous agreement.
• Positive Relations With CEO: Mutual respect between the two is the hallmark of the relationship. Differences are settled without rancor, understanding that each role has boundaries – the board has the final word on policy and strategy while, at the same time, the CEO has final authority on operational decisions.
• Acquainted With Technology Basics: Since the use of technology is pervasive, the chair should be able to intelligently lead the board discussions on major technology issues. These currently include the use of the Internet, use of cloud computing and social media. Discussions can range from purchasing technical hardware and software to questions of privacy protection.
• Strategy/Policy Development: The chair has major responsibility to see that these topics are placed on the agendas, and, where approved, are implemented on a timely basis. Over the years, both issues on FP and NFP agendas have not been given the discussion time they deserve. These topics can range from pension reforms to whether or not an organization should have an acquisition/merger strategy.

The challenges facing nonprofits, their CEOs and board chairs have escalated and will likely continue to escalate. The managerial requirements for nonprofit CEOs have risen. But it has not been the same for the board chairs. Although a part-time position, nonprofit boards and their stakeholders should realize that they need to elect people with leadership know-how. They are not necessarily the people who make the largest financial donations. The two can be the same, but nomination committees must be certain that whoever is chosen to preside as board chair has the requisite skills to do so.

What Nonprofit Boards Are Not Doing – But Should! A 2013 Top Post With 681 Viewers!

What Nonprofit Boards Are Not Doing – But Should! A 2013 Top Post With 681 Viewers!

By Eugene Fram

A recent New York Times article* reports that public company directors are coming under scrutiny this proxy season based on what they are not doing. Based on my experiences with dozens of nonprofit organizations, the litany of complaints cited in the Times article, can easily apply to nonprofits, whether they are professional organizations, trade associations, educational institutions or charitable organizations. (more…)

Are You Recruiting Board Directors With a 21st Century Approach?

Are You Recruiting Board Directors With a 21st Century Approach?

By: Eugene Fram

Over the last three years, I have conducted several nonprofit board recruitment projects. The boards with which I worked had rather similar challenges. (more…)